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Bloomberg West

The personalities, companies and trends that are transforming the global economy.

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Us 11, Comcast 7, Cory Johnson 6, China 5, Google 5, At&t 4, Intel 4, New York 4, Nsa 3, United States 3, Emily Chang 3, Fcc 2, Al Franken 2, Tom Wheeler 2, Galileo 2, Directv 2, Sidney 2, U.s. 2, Franken 1, Larry King 1,
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  Bloomberg    Bloomberg West    The personalities, companies and trends  
   that are transforming the global economy.  

    May 22, 2014
    11:00 - 12:01am EDT  

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in san from pier three francisco, welcome to bloomberg west, where we cover the future of business. i am emily chang. jd.com get a jumpstart on alibaba, going public in new york today. we look at what the shares say about the market for tech companies. and intel is looking to get inside the growing maker movement. we caught up with the ceo to find out his plans for their future. this is a "bloomberg west" exclusive. first, our editor-at-large cory johnson has the top tech headlines. >> cutting another 16,000 jobs,
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48,000 job cuts in total. and 18% gain in second-quarter profits but yet another drop in sales, 1% for the 11th quarter in a row. facebook taking steps to improve user privacy. post from new users will now automatically default to friend. that means it can see be seen by friends only. they are also rolling out a privacy checkup tool that will remind you about privacy setting. air b&b has agreed to provide the new york attorney general with data about its host, new york city. they will have to provide names if the attorney general chooses to investigate. >> our lead story of the day,
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shares of jd.com are off to a good start as the company went public today. shares rose after being priced at $19 last night. they raised about $1.8 million for jd.com. they have a business model similar to amazon. they now have a market cap of $28 billion. they are the largest chinese internet listing in new york. of course, alibaba will easily take that title once a goes public. cory johnson is here with me in the studio. these companies are often compared. they are very different. >> principally because jd.com is an old-fashioned internet retailer. >> more like amazon. >> they take on inventory and sell that too. unlike amazon, they are not experimenting with delivery. they are very big in the world of delivery.
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they have warehouses all over china. they will deliver right to the door. they're right there delivering product. >> there is also same-day delivery. >> 86 warehouses. 36 cities. when you look at the revenue story, you see a company that is selling a lot of stuff. you translate that to u.s. dollars -- $3.3 billion in revenue and growing. still growing at a 60% clip. that is a very impressive growth rate on a very big number. >> what are the prospects for a company like jd.com. it seems like investors are enthusiastic. >> the valuation is very high. things will get better. part of this deals very interesting. they are selling 15% of the shares at ten cent. they will say this is a ten cent platform.
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that is next with the deal that goes many years beyond me payment. they will get to a place where they could tell all of their products. they are losing money, but the losses are getting better with every quarter. on a dollar basis, because it is a seasonal basis, they are getting better and better every quarter. it looks like you can see the improvements you want to see, at the same time that revenues are growing. >> we are going to be speaking with the cfo in just a few moments. i want to ask him about that partnership. cory johnson, thank you. now to another big tech story of the day. roughly one year after edward snowden of first unveiled some surveillance secrets, the house has approved its first legislation designed to rein in the nsa. critics say that the bill does not go far enough. peter cook is on the hill with
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more. what does this bill actually do? >> supporters say it is a signal moment in this whole debate over the american surveillance program. they insist that this bill balances national security with americans' right to privacy. critics contend it does not strike the right balance. they still basically to give the government too much latitude in terms of searching records. let me tell you what it does. the bill, according to supporters, bans the government from bulk collection of data. it also requires phone company to store that data. the government can still search it, but they need a court order. there is more oversight of that court under this legislation. there's is also greater disclosure on the part of companies that request information from the government. they can disclose more about that, something the tech community has lobbied for. they say there are two main
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loopholes in this bill and it gives the government too much latitude. supporters insist the balance has been struck and detractors say no, we need to look at this more. take a listen. >> in the post-freedom act world, we have turned the tables on the nsa. we are watching you and we will. >> these changes appear to allow multiple interpretations as to what the nsa can and cannot do. the bill now confuses what it intended to make clear. it seems we are back where we started. >> though today was overwhelmingly supportive. more than 300 votes in favor. the white house supports this bill. what will happen in the senate, where leaders insist they will take a look at this legislation and likely propose something quite similar as well. >> and what about the technology companies? they are not too happy with this bill.
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>> they are not too happy. they were initially supportive, as were a number of privacy groups. at the end of the day, there were late changes with requested by the intelligence community. they say there are loopholes here that will allow for the bulk collection of internet users' data. there are a number of companies, google and microsoft, who said they could not support this bill at the end of the day. they urged congress to dig deeper into this. the specific area they are worried about -- the terms of surveillance community, the language used in the bill like terms identifying a person entity, town, address -- they say that language is too broad. they worry they are going to pay the price from a business standpoint in terms of reputation around the world. not just in the united states. they're still playing ball with the government too much. >> all right, we will continue
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to follow the spill is a progresses. thank you. still ahead, jd.com stars trading on the nasdaq and the biggest offering ever of the chinese internet company in new york. we will speak with their cfo next. you can watch a streaming on your phone, tablet, bloomberg.com, apple tv and amazon fire. ♪
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>> i am emily chang and this is "bloomberg west." jd.com rang the opening bell as they went public in the united states. it raised $1.78 billion in their ipo. shares are $19 a piece. they have been compared to amazon and this comes ahead of
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the highly anticipated ipo of alibaba. cory johnson is still with me and we are joined by jd.com's cfl. thank you for joining us. i would like to start off with the comparison to amazon. is that a fair comparison in your opinion? >> yes, they do share the same obsession for customer experience. but jd does go one step further in providing our own in-house logistics services. namely, the last mile delivery to our customers. >> what about alibaba? you hold inventory and they're more of a middle man. that gives the margins that you may never people to achieve. >> we have control over our product quality and
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authenticity. we also have control over the service level. so this is a very important differentiation of our business versus the pure marketplace business model. >> sidney, talk to me about the partnership with ten cent. i wonder if revenue growth might rick sorry because you have so many customers on that mobile platform. >> this is really a very important part of jd.com, combining the largest e-commerce company with the largest internet company in china with the largest user base on pc and mobile. >> now, talk to me about what you're investing in fulfillment sectors. that is really the key to your continuing to grow and be able to reach the rural and western parts of china. it also puts the pressure on your timing when it comes to making a profit.
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>> if you look at historically and in the past few years, for example, the cap level was pretty manageable. we have been able to have free cash flow over the past two years. i think investment is actually more measured than most people expected. and moving ahead, we will continue to invest, especially for the seven major fulfillment centers. we will make sure we have control over the key geography. >> sidney, as a former kpmg auditor, you probably know more about auditing than i will ever learn. i do not know why your company has a material weakness in your control. >> we have recruited a very large number of professional finance and accounting teams.
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we have more than 30 staff with accounting backgrounds. in fact, if you look at the nasdaq or the chinese companies that initially go public -- everyone has this material weakness. certainly, as a company in a foreign country, we will continue to improve our competency in the u.s. cap. >> i guess it makes it even more concerning that they cannot even check the audits of your auditor. when do you expect the material weakness to be corrected and how can you keep that from happening in the future? >> we have confidence that this material weakness will be lifted in the near future. >> last question about your
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founder. analysts have expressed concerns that he maintain something like 84% of voting power. how do you assuage those concerns going forward? >> it is very important for an entrepreneurial company to have control over its operations. this is also very common in the internet space. if you look at facebook in the u.s. or baidu in china -- the shareholding structure is pretty common. >> all right, cfo on your first day of trading as a public company in the united states, thank you so much for joining us. anonymous social media apps have surged controversy in silicon valley. is it warranted? we will ask the founder of secret coming up next. ♪
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>> welcome back. secret is one of the highest apps in silicon valley right now. it has also been called a scandalous. it allows users to post their thoughts anonymously. secret expanded to android users this week and internationally. with me now is their cofounder and chief of product officer. thank you for joining us. everyone is talking about you guys. i have been looking forward to this. i was looking at the app and they pulled a few secrets to give people an idea of what they can see on it. number one, the best part of my day is when i see his face. number two, i am gay. that is better. three, i have not washed my hair in 11 days. what is your vision for this?
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>> david and i have worked on social networks for several years. over the years, we notice that something is missing. we have all these thoughts and feelings that we have every day. we do not have a place for them. they do not belong anywhere. like some of those things you just mentioned, or i want to get engaged. or i want to quit my job or i am falling in love or him falling out of love. all the software we have every day, they just don't have a place. secret is a place to share those thoughts with your friends. these ideas start a secret. they start as private and personal to you and there's nowhere to put them. >> you both worked at google. david, i know you worked on buzz, google plus -- there is a lot more guilt with using secret than a typical social app. is that a good thing? >> yeah. i think being provocative is good and interesting. >> can you give us an idea how many are using it?
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>> it is a secret for now. [laughter] >> all right. you asked for my e-mail, my phone number when i set up. why do you need that information? can your employees see that? >> absolutely not. security is most important. we ask for those so you can connect with your friends. you immediately build your social network and social graph. you can start sharing with friends and friends of friends. >> anonymity breeds negativity. how concerned are you about negativity? >> safety is a top priority for us. we want secret to be a safe place. we do not want it to be a place where people can hurt each other. we have invested a lot in our security team in moderation team. we have worked with experts to build out our internal guidelines. when things are flagged on our platform, the team does review it. it is taken down and it does not meet our guidelines. >> we're having to grow up really quickly.
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>> in terms of taking down posts, what does that involve? how actively are you watching and removing? some of the post single out specific people by name. maybe they are true, maybe they are false. >> absolutely. we want this to take place for private individuals. newsworthy individuals is a different story of another. we should be able to talk about obama or whatever. >> what if it is not true? >> we are not in the business of deciding between true and false. when people in the community flagged content, that is when we look and make a judgment call. >> do you worry that could open you up to legal issues? >> well, we have really good lawyers and we are prepared for this stuff. in the case that someone does do something illegal and we are subpoenaed, we do have the ability to turn that information
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over. ultimately, this is not a place for him awful or illegal activities. >> ok. you have a lot of reporters and big-name investors. you also have mark andreessen who went on twitter -- never singled you guys out, or when for it by name, but tweeted that such experiments start out as naughty fun and, in the end, everyone regrets participating. how do you respond? >> he has experience, but it is our job to solve this problem and make a productive product using anonymity. >> this is silicon valley. secret is not only in silicon valley. people are using this around the world now. when you see it, it is more like a dinner conversation. you go around the table and add your story. that is the majority of the stuff we see on secret. people like to predict the
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future. it is very hard to predict where they will go. >> when you look at the product, it is somewhat of a reflection of who you know and of your friends. a lot of things you see are actually things that are being said in public or in private. >> evan williams and jack dorsey are two of your mentors. i know that they have been helpful. >> in various ways. we spoke early on about the idea of this product. he helped us think about and talk about it. jack is just a very deep thinker. he was the one who helped me realize that this could he a powerful force for self-awareness in the world. >> how can you make money? >> it is still really early. we have only been out for four months. we have a lot of ideas, but it is not a priority. we're focusing on the product to make sure it is successful before we consider that. >> last question, about whisper.
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they seem to be focusing on content and breaking news. how do you see yourself as different? >> we are a communications platform. we went deep, meaningful conversations. >> we will keep watching you guys. i will. secretly, on my app. thank so much for joining us. well, intel is betting big on the maker movement and we hit the maker fair with brian krzanich next. >> let's get you caught up on where stocks traded today. wall street finished higher for the second day in a row. and hsbc survey suggested the slowdown in china's economy is
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flattening. let's check the boards, the dow industrials finished up 10 points. the s&p 500 up for, and the nasdaq up 22 points. ♪
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>> you're watching "bloomberg west." intel is one of the godfathers of moderate silicon valley. they have tried to establish themselves in the modern world. making tools for hackers and hobbyists. our editor-at-large, cory johnson, met up with brian krzanich. that word, hobbyist, makes it seem like this is not a big movement. >> it is a big movement. it is packed. when our producer and i were going to this thing, we were stuck in traffic for miles around the event. >> what are they making? >> everything, firebreathing
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dragons, computers that control trash cans. sneakers with speakers. electric cars, wild stuff. it takes us back to the earliest days of technology. i remember making a heat kit. they are making all kinds of things. brian is at the center of it. check this out. >> i was born and raised in silicon valley. in my backyard was a plum orchard. that is absolutely true. that is old silicon valley. this is the future. this is a galileo board. yes. the cork in the center there. it is designed for just this kind of environment. so, that is what we developed.
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it is made for the maker. we are starting to use it in wearables, stuff like that. >> do you see the makers gravitating towards this chip? >> we are sold out. this has taken off -- we gave 50,000 of them away to universities. we are not building them as fast as -- demand was six times what we forecasted. >> really? why is that? intel chips have been -- >> i think it is probably because there seeing it and we embrace it in the community. the board itself is a beautiful board. >> if you would have asked intel 10 years ago where the direction would be -- pc, pc, maybe mobile
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pc. not robots, lights, stuff like this. how do you make sure that intel is an integral part of this movement? >> i think it is by me spending days like today. hiring guys like joey, that you just saw. we have a whole group focused on this maker community now, making products for them. these are the people who will be the next steve jobs and the next google and everything. these are the people who are being raised up with technology and innovation. that is really what we saw the last couple of years. if they are not aware of intel technology and what we are capable of doing and if we are not aware what their needs are, then we will not line up together. >> it is really interesting to see intel in that environment. you imagine him being so
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buttoned up and formal. what about the rest of the business? how are they planning for their future? they're not a big and mobile. >> they are thinking, how can we get so far ahead of the next development? we are just part of that atmosphere. part of it was not just the makers. they are very involved in encouraging young girls to stay with math and science through that age when they stop. brian has young daughters, i have young daughters. it is dear to both of our hearts. we met some girls they're doing this really cool project and technology, using intel chips. check this out. >> the button releases -- >> look at that. >> that is one of those galileo boards. >> very cool. that is what turns it off, when it closes?
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that is very clever. >> we really discovered this in sixth grade. part of the reason is so that we can capture them in third grade. we went to keep them through college. once they get high school, there is no program for them. by capturing them in third grade and keeping them through 12th grade, we hope to propel them in. >> how big is this market? you look so far into the future. >> i don't know how big it is going to be. we have our next product coming out this summer. it is a pc and card about the size of an sd card. we have a contest going on called "make it wearable." it is to see who can make things. we do not know what is going to happen. i think that is the fun part of this. we have a lot of things that just kind of so-so.
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but one of these things will take off. >> i was surprised when i looked on facebook. >> it is everybody now. whether you participate or come to watch. a lot of people come in to this movement. they become big. >> what is so attractive to people who are not in tech? i guess in this community most people are in tech. >> i went to a maker fair in rome. it was just as exciting. people are in and out of tech. it is something about the innovation and thing with somebody can make. this is not all about this event is not all about high tech. not everyone is building everything with galileo boards. cardboard elephants or wind generators using home depot buckets. or even these devices. it is about creativity.
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figuring out just what you could build. >> business wise, are you trying to seed a market or be there for whatever market takes off? what is your business plan? you surely sat down with spreadsheets and what are we going to do. >> actually, we have not sat down with spreadsheets as much as said, this is a community that you see things like kickstarter. these are the places where the next new product, the next great product, will come out of. either this place were these people. but we found was that we were absent from this. they did not know intel and we did not know them. by engaging with them, they now know intel. they know our products, they know we can do. they will come to us. what we have found, as you saw,
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they are making our products better. they give us input. do this, at this, we like this feature. by working with them, they will know us and we will know them. this is an investment for the long haul. we do not know where this will go and we're ok with that. >> it is interesting, they spent so much money. they're are the most active venture capital company. this is a way to seed markets and get in front of the inventors before they know what they're going to invent. >> do you see this becoming a core part of the business? >> pedaling elephants, probably not. having inventors saying i have a cheap circuit board, what can i do -- whether it is a little girl who wanted speakers on speakers, which i loved. there was a girl who invented a unicorn.
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it closed the circuit and the horn would blink. for that girl to be inventing stuff, who knows what she is going to invent when she is 18 or 35. she has got this experience. early on in her life. it really did have me thinking about when i was a kid. we would have these heat kits. we would learn what a capacitor was, how to soder together a circuit board. i did not become someone who invented circuit boards, but it has. on to wearing makeup for a living. >> ok, thank you, good to hear. up next, al franken joins us to talk about consolidation in the tv industry. from time warner cable and comcast to directv, we get his thoughts on how he feels it will impact those businesses and
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consumers. ♪
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>> welcome back. i am emily chang. spotify now has more than 10 million paid users and more than 30 million users listen for free. they still face appears competition, including pandora and a possible apple beats. they spoke about their future with charlie rose. >> for spotify, we started off with the ability to play music. we are now becoming experience for every moment of your life. going forward, what i hope is that we can take this technological shift and move it from not just being about
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listening to music to being about how we create music. >> you can catch the full interview tonight on "charlie rose" at 8:00 and 10:00 eastern. this week center al franken sent a letter asking him to explain the commitment to net neutrality. announcing a plan for at&t to buy time warner for billions. he joins us now from capitol hill. cory johnson also with us. senator, thank you so much for joining us. have you gotten a response to your letter to brian roberts yet? >> not yet, they just got it. they have been going on tv about
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how they are -- and touting how they are buying time warner cable and that will extend net neutrality to a greater number of consumers. but, that is because they are required to by the conditions put on their acquisition of nbc universal in 2010. that runs out in 2018. they refused to say what they're going to do after 2018. >> let me play that. >> go ahead. >> i want to play a good portion of that. i just saw it today. here are seven seconds of that ad. >> how do you make life online better for more people? start by extending net neutrality protection to more americans.
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>> your reaction? >> ok. they served by buying the second-largest cable provider and they are the first-largest. you start by buying the third largest internet broadband provider. you are the first largest internet broadband provider. live up to the conditions that were imposed upon you by the fcc. the moment those conditions stop applying to you, you do anything you want. that is kind of really not entirely honest. >> you have called the comcast and time warner deal a disaster. you're not too happy with at&t and directv either. how disastrous you think this could be? >> at&t and directv is more consolidation.
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i have not really looked at that as thoroughly as i have comcast and time warner. comcast and time warner cable are really competitors. they are both cable and broadband providers. to me, that was immediately, i opposed that from the get-go. i want to study at&t and directv a little more. but, at the hearing we had on comcast and time warner, comcast said that this would just start more competition if we combine. there'll be a dogfight and innovation and this is the first thing that has happened. another huge company buying or wanting to buy another huge company. what is happening is that there
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is more concentration in telecommunications. that is very, very concerning. the result, i believe, will be less innovation and less choice for consumers. higher cost for consumers and more service. -- worse service. >> which is a greater concern for you? concentration of cable and broadcasting with these two companies coming together, or the potential impact in the future on the world of broadband? >> they're both very concerning. of course, there is a relationship between ned neutrality and this comcast buying time warner cable. they both have 40% of all broadband. netflix has paid, essentially. >> not essentially. they paid for the plan.
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>> they paid for a fast lane. that speaks directly to net neutrality. for your viewers who may be -- net neutrality is a term that not everyone understands. it has basically been the foundation of an open internet. all content travels to the consumer at the same speed. the perfect example of this is that there was this thing called google media. or google tv or google something. there was this format. youtube was starting up the time to compete with that. it was google video. they, over a pizza shop in california, started to develop youtube. because youtube could travel the
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same speed as google video, people liked youtube better. they could sample it and youtube became a youtube. if there is a fast lane for corporate entities, big content, netflix, or any corporate entity, which is what wheeler is talking about -- chair of the fcc. then he would not have had this kind of innovation. innovation has happened not just while we have had net neutralities, because we have had net neutralities. they happen because of net neutrality. we have to maintain that. >> you're worried about the -- finish your thought, sorry. >> you asked about delivery of television and ownership of content. that also is a concern of mine. bloomberg, there is a relationship there.
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we will have more after this quick break. ♪
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>> welcome back. senator al franken has been one of the most outspoken opponents of the comcast time warner merger. we spoke with him earlier today. this is part two of that conversation. >> what do you think the government is actually going to do in this situation? tom wheeler seems to be moving that action as well. how do you see this ultimately playing out? >> comcast has not paid members
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of the judiciary committee. they have a lot of lobbyists and a lot of executives. they have contributed money to members of the judiciary committee. i don't want to comment on that. as far as tom wheeler, you mentioned that there is a revolving door. michael powell heads up the cable association. so, you know, i don't know what the fcc will do. they are the ones who make the decision on the comcast and time warner deal. i made my objections known right away when i first heard about that and i have sent. -- and i have since. i will continue doing that. i try to raise those during our hearing. so, i don't want this to happen
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and i am doing everything i can to stop it. >> it sounds like your concerns are very strongly about business. and the business opportunities that would go away after the merger. >> exactly. that is why doj has to look at the antitrust aspects of this and why fcc has to look at if this is in the public interest. that is what they have to measure this by and they have failed. >> all right, senator franken is joining us from washington. thank you so much. we will continue to follow both of these mergers as they play out. thank you so much for watching this edition of "bloomberg west." cory, have a wonderful day and we will see you later. ♪ >> the following is a paid
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program. >> the following is a paid advertisement for omega xl. >> mining is larry king. i had to have open heart surgery. when i recovered, i established the cardiac